Corporate Campaign to Corrupt The Kyoto Protocol Continues After COP-6

Corporate Europe ObservatoryApril 1st, 2001

The UN Climate Change Conference in The Hague (COP-6) last
November -- intended to wrap-up three years of negotiations on the
implementation of the Kyoto Protocol -- ended without result. At the
last moment, European environment ministers rejected a
compromise proposal that would not only have enabled
industrialised countries and their corporations to escape their
promised greenhouse gas reductions, but also would have allowed
them to significantly increase their emissions. Northern
governments and the unified corporate climate lobby demanded the
right to "fulfill" their reduction commitments through various inventive
but flawed instruments, including global emissions trading, as well
as the accounting of 'carbon sinks' (carbon absorption via forests,
wood products, soil and industrial and genetically modified
agriculture) and nuclear energy. [1] For a comprehensive overview
of the wide range of global equity and environmental problems
related to the proposed emissions trading and other market-based
"solutions" to climate change, see our November 2000 briefing
"Greenhouse Market Mania". [2]

Their efforts received active backing from a new financial sector that
has emerged even before consensus has been reached on the
Kyoto rules - the emissions brokers. With a massive presence in
COP-6, and armed with huge injections of corporate financing, they
have been lobbying hard for 'global free trade in greenhouse gases'.
The attraction is clear - the market in carbon emission credits
could grow to trillions of US dollars over the next few decades. At
COP-6, this unholy alliance was only inches away from turning the
Kyoto Protocol into the most corporate-friendly environmental
treaty in history. Unfortunately, these corruptive efforts do not seem
to have lost steam in the run-up to the next UN climate change
negotiations, to take place in Bonn in July 2001. The big question
mark after COP-6 is which strategy the new Bush administration
will pursue: de facto withdrawal of US support for the Kyoto
Protocol or a continuation of the Clinton-Gore legacy of trying to
reshape the Protocol to serve US corporate interests?

COP-6: Free Trade in Greenhouse Gases?

The International Chamber of Commerce (ICC) and the World
Business Council for Sustainable Development (WBCSD) were the
most visible industry lobby groups at COP-6, with over 100 and
over 200 accredited lobbyists respectively. [3] Oil and gas giant
Shell was the corporation represented in biggest numbers, with
over 40 lobbyists in the corridors of COP-6. The ICC and WBCSD's
messages were all too predictable: no binding government
regulation, encourage voluntary action by industry and unlimited
use of the Kyoto Protocol's 'market-based mechanisms' instead. In
a revealing statement, ICC Vice-President Richard McCormick
warned against, "a 'quick-fix, look-good' deal that causes a
dramatic and costly shift in the way industrialized countries use
energy." [4] Such a shift is, of course, exactly what is needed if
catastrophic climate change is to be averted.

While the ICC put great effort into positioning itself (and business in
general) as environmentally responsible, it's lobbying efforts aimed
to prevent measures which would effectively combat ever-increasing
CO2 emissions, measures which the ICC calls "command and
control" policies. The Global Climate Coalition, which aggressively
opposes the Kyoto Protocol and is widely seen as the most
irresponsible business lobby group, used a different rhetoric style,
but lobbied on a platform largely identical to that of the ICC,
focused on unrestricted emissions trading. In fact the difference
between the two groups is far smaller than is often assumed. One
of the prime ICC spokespeople in The Hague was Brian Flannery of
ExxonMobil, a company infamous for fighting the Kyoto Protocol.
With his ICC-hat on, Flannery delivered the ICC's rosy "free market
environmentalism" discourse to the media. But during COP-6,
Flannery also spoke out as lobbyist of ExxonMobil and then the
feel-good rhetoric was replaced by questioning the scientific
evidence for climate change and making warnings against
government investments in green technology. ExxonMobil is "firmly
against the Kyoto Protocol" because "it achieves very little and
costs too much," Flannery told the Earth Times. [5] Flannery,
whose company has no plans to move out of fossil fuel production,
explained that "you are going to need to expand the supply to meet
the pressing future needs for energy, for things like the modern
Internet, the "e" economy."

While traditional corporate lobby groups attended COP-6 in record
numbers, the most remarkable difference with previous meetings
was the overwhelming presence of emissions brokers. Reflecting
the degree to which the market-based mechanisms dominate the
UN climate talks today, the conference centre was teeming with
lobbyists from emissions brokerage firms, many from global
consultancy giants like PriceWaterhouseCoopers and investment
banks that have discovered "the carbon economy" as a new
potential goldmine. The emissions brokers are united in a number
of lobby groups, the biggest of which is the Emissions Marketing
Association, which brought 48 lobbyists to The Hague. [6] Add to
that specialised magazines like The Carbon Trader and The Carbon
Market Analyst, which flooded the conference centre with
expensive glossy brochures, and COP-6 looked more like a trade
fair than an intergovernmental conference looking at ways to solve
one of the world's most pressing environmental and social
problems. Oblivious to the core social and environmental issues of
climate change, the emissions brokers' rallying cry for global free
trade in greenhouse gases rang loudly in the halls at COP-6 and in
the ears of the government delegations deliberating there.

Quantitative and qualitative restrictions in the use of market-based
mechanisms, as demanded by many environmental NGOs, will
only limit the amount of carbon credits entering the markets, the
emissions brokers and rest of the corporate lobby argued. [7]
According to ICC lobbyist Brian Flannery: "a ton of CO2 is a ton of
CO2. The freer the market is, the lower the price will be". [8] But
while low price carbon credits are obviously attractive to business,
they are generally bad news for the environment. If the corporate
dreams of abundant cheap carbon credits for sale on the emerging
global carbon markets came true, it would only reflect that industry
had been allowed to escape reducing its CO2 emissions at source.
This could be done, for example, by buying credits from industrial
tree plantations, generally to be located in the South. Business
lobby groups consistently ignore the fact that allowing these
"carbon sinks" to count as effective offsets for CO2 emissions is
scientifically flawed and would result in a dramatic increase in
global greenhouse gas emissions. And as the World Rainforest
Movement points out, large-scale tree plantations are "commonly a
direct cause of deforestation, deplete water resources, worsen
inequity in land ownership, increase poverty, lead to evictions of
local peoples, and undermine local stewardship practices needed
for forest conservation". [9]

EU Sell-Out Blocked at Last Moment

The corporate groupings could however rest assured that their
lobbying efforts before COP-6 would bear fruit. During COP-6 they
only had to keep up the pressure to avoid governments shifting
under pressure of environmental NGO lobbyists as well as creative
actions and demonstrations that took place both inside and outside
the conference centre. [10] Until the very last night of the
negotiations, the climate summit in The Hague was remarkably
uneventful. The positions of the dominant, Northern governments
had been clear from the start and mainly differed in the extent to
which they advocated the sell-out of the Kyoto Protocol. On the
one hand there was the umbrella group, consisting of the United
States, Japan, Australia, Canada, Russia and Norway, promoting
the unlimited use of the Kyoto market mechanisms, on the other
was the European Union arguing that countries should achieve at
least 50% of the reduction commitment 'at home'. The EU also
voiced doubts about the inclusion of carbon sinks under the market-
based mechanisms. While the umbrella group called for an
unlimited use of carbon sinks, the EU had proposed a 'positive list'
for the UN's Clean Development Mechanism (CDM) that would limit
the projects to sound technologies such as renewable energy,
thereby excluding nuclear energy investments. [11] Finally, the EU
argued for financial sanctions for countries that fail to meet their
Kyoto obligations, while the umbrella group opposed binding
measures (such as penalties and fines) for non-compliance.
Southern governments united in the G-77 Group took positions that
were clearer and more progressive than those of the EU. Towards
the end of COP-6, the EU moved more and more towards the
positions of the US and the Umbrella group. This reflects deep
divisions within the EU and the wider trend of growing enthusiasm
for "market-based" environmental policies, including emissions
trading and business "self-regulation" among European
governments.

The last day and night went with the US and EU and a small
number of other countries negotiating to find a compromise. COP-6
chairman Jan Pronk (the Dutch Environment Minister), eager to
steer the conference to a result, had submitted a compromise
proposal that leaned heavily towards the US position. His proposal
included allowing unlimited use of market-based mechanisms and
very extensive use of 'carbon sinks' as well as hot air trade (in
which spare emissions permits are offered up for sale) to 'fulfil' the
Kyoto reduction targets. [12] The proposal would de facto have
meant a climate treaty that permitted industrialised countries to
increase their emissions, in contradiction to what was agreed in
Kyoto in 1997. [13] A 'handshake deal' based on the Pronk
proposal had actually been reached, but was rejected at the last
minute by the more progressive of the EU environment ministers
(including Germany, Nordic countries and France).

Crusade Continues

It did not take the proponents of this disastrous set of rules for the
implementation of the Kyoto Protocol long to regroup after COP-6.
In an attempt to achieve a breakthrough, an informal Ministers'
meeting involving the US, Canada and a number of European
countries took place in Ottawa in early December. According to the
Wall Street Journal, a number of EU governments had changed
their mind about the proposal they rejected in the last hours of
COP-6 and were now ready to endorse it. [14] The "second
thoughts in the EU camp," the newspaper writes, "were prompted
by major pressure from European businesses." The ministers
meeting ended without result, clearly some European ministers
remained unconvinced, but the incident shows clearly just how
business-friendly the failed COP-6 deal was. It must be the first
time ever that business has pressured governments to finalise an
environmental treaty.

Indeed industry, bolstered by the reception it has been given by
many governments, expects the follow-up conference in Bonn,
Germany to deliver the kind of Kyoto Protocol it desires. One
observer from a European corporate think-tank stresses that the
negotiations only failed due to lack of time and that a deal on the
market-based mechanisms was almost reached, making the failure
of COP-6, "a minor incident in the history of international
negotiations." [15] The pressure remains high for the Kyoto rules to
include industrial tree plantations and other controversial projects,
in order to supply the emission markets with cheap carbon credits.
At an "environmental finance" conference in February, Frank
Joshua of the consulting giant Arthur Andersons, stressed that
carbon credit markets where only carbon credits earned through
renewable energy projects are for sale (i.e. excluding nuclear, large
hydropower and carbon sink projects) are not "liquid" enough to be
attractive. [16] The Carbon Market Analyst, one of many new
publications for the "emerging carbon market," adjusted its so-
called ECX index (estimated carbon value index) downwards from
1.31 before COP-6 to 0.51 after the conference, reflecting that
increased uncertainty was reducing demand for pollution permits.
[17] At the same time, the newsletter remains highly optimistic
about future market developments. "It appears likely," writes the
Carbon Market Analyst, "that an agreement at a resumed COP-6
will involve a considerable amount of sink activities with low or 'no'
costs."

At the same time, there is little doubt that the explosive growth of
international emissions trading will continue despite the breakdown
of COP-6. More and more Northern governments, not least in
Europe, include emissions trading in their domestic climate change
policies in the expectation that international markets for
greenhouse gas emissions will develop with or without the Kyoto
Protocol. [18]

The Bush Factor

The future of the Kyoto Protocol looks even less hopeful after
George W. Bush took the office of president of the United States.
President Bush, himself an avowed climate change sceptic, has
called the Kyoto Protocol "ineffective" and "unfair" and is expected
not to submit it to Congress for ratification. On one of the rare
occasions during his elections campaign that Bush talked about
his future climate policies, he said he would oppose any policies,
such as the Kyoto treaty, which "would drastically increase the
cost of gasoline, home heating oil, natural gas and electricity." [19]
Both Bush and his Vice President Dick Cheney have a background
as CEOs of oil companies and their campaigns received millions of
dollars of backing from the US oil industry. Cheney was until
recently a member of the Board of Directors of the American
Petroleum Institute, one of the most hard-line lobby groups among
the opponents of the Kyoto Protocol. The Bush administration's
position is likely to reflect that of the Republican majority in
Congress, which has been traditionally hostile to the Kyoto
Protocol. [20] Only a few days after taking office, the Bush
administration requested that the COP-6 follow-up summit in Bonn
be postponed till July. [21]

The worst expectations seemed to be confirmed by steps taken by
the Bush administration in March. First, Bush wrote a letter to four
Republican senators in which he said that he does not want to
regulate CO2 emissions from US power plants, and that he had
made a mistake calling it a pollutant! [22] Shortly after, the White
House stated in unmistakable terms that it would not implement
the Kyoto Protocol, but instead would work towards a new deal
that included reduction commitments for Southern countries as
well. [23]

The degree to which Bush decides to obstruct future UN climate
negotiations remains to be seen. Some observers expect that US
corporations who see commercial opportunities in global emissions
trading will encourage Bush to stay involved and continue the
Clinton-Gore policy of shaping the Kyoto Protocol to benefit US
business interests. Among these are the companies working with
the Pew Center, which considers greenhouse gas regulations
unavoidable, thereby making it a sound business strategy to
benefit optimally from emissions trading and other market-based
mechanisms. Chemical giant DuPont, for instance, is "very
anxious" for an international trading system in greenhouse gas
emissions, and "supports a resumption of the Kyoto talks", says
company spokesperson Paul Tebo. [24] The wish by parts of US
industry not to be locked out of international emissions trade might
bring Bush back to the negotiating table. [25] Others, however,
expect a more general US disengagement on climate change
issues, a perspective that reportedly pleases many major
corporations who believe they will now "be let off the hook."
Remarkably, one of these is self-proclaimed environmental angel
BP Amoco, where according to Earth Times, the Bush victory has
sparked "a debate about the usefulness of participation in the
global debate on climate change." [26]

Kyoto Protocol without the US?

French, Danish, German and other European environment
ministers have proposed that the European Union countries ratify
the Kyoto protocol without the U.S., in an attempt to "shame" the
U.S. into action. Such moves would however face massive
opposition from European industry lobby groups. CEFIC, a powerful
lobby group which represents the chemical industry, warns against
"any agreements that would be too unilateral" and that would give
US industry a competitive advantage, as secretary general Jean
Marie Devos made clear in the weeks after COP-6. [27]

It can certainly be argued that it would be beneficial for the future of
the UN climate talks if the US would (temporarily) withdraw. This
would remove a major obstacle for creating an environmentally and
socially responsible set of rules for the Kyoto Protocol. If the US
chooses to stay involved and continue to pursue only its own
narrow commercial interests, meanwhile corrupting other
governments in the process, the US deserves to be isolated in the
negotiations. Rather than accepting a flawed Kyoto rulebook to
ensure US acceptance, a deal could be struck among the
governments that do have a real commitment to stop global
warming. The US government would then have the choice to sign
on or to reveal itself as the prime rogue state in international
climate change politics. However, aside from the fact that isolating
the US government is hardly politically feasible, the truth is that the
pressure to undermine the Kyoto Protocol with flawed market-
based mechanisms is far from limited to North America.

Two new UN reports released in the first months of 2001 present
new evidence of human-caused climate change and the disastrous
effects it could have in the 21st century (including more droughts,
floods, storms, and the spread of insect-borne diseases). In order
to avoid these terrifying scenarios, it is a matter of great urgency to
halt the massive over-consumption of fossil fuel-based energy in
the North. Recalling that the Kyoto Protocol's reduction target are
in themselves far from sufficient to halt climate disaster, it is
absolutely essential to close off the commercial escape
mechanisms that are aggressively pursued by international
business.

NOTES

The 1997 Kyoto Protocol mentions three types of market-based mechanisms, originally intended to play a minor role in achieving
CO2 emission reductions: emissions trading, joint implementation
(JI) and the Clean Development Mechanism (CDM). Emissions
trading allows the 39 governments committed to collective
reductions under the Protocol to trade the right to pollute among
themselves. Under this scheme, due to start in 2008, a country
might choose to buy emission credits from another country that
had managed to reduce its emissions below its Kyoto targets.
Joint implementation and the Clean Development Mechanism
(CDM) grant Northern governments and corporations emission
credits through special projects aimed at reducing greenhouse gas
emissions in the host country. These projects can be carried out
among industrialised countries and corporations (JI) or between
one industrialised government or company and one Southern
country (CDM). The market-based mechanisms are often simply
referred to as emissions trading. For a critical analysis of these
mechanisms, see "Greenhouse Market Mania - UN climate talks
corrupted by corporate pseudo-solutions", is a 55-page CEO
briefing published in November 2000, http://www.xs4all.nl/~ceo

The Clean Development Mechanism (CDM) was intended to
facilitate the transfer of funding and technology for energy efficiency
measures to Southern countries. The umbrella group wants all
technologies, including nuclear energy and the whole range of
carbon sinks, to be included in both the CDM and under JI.

Pronk's 'compromise' proposal included: no limits on the use of international market mechanisms (EU and G-77 would give up their
demands for respectively 50 and 70% domestic action), allowing
very extensive use of sinks (although not in the CDM), largely
unlimited hot air trade (Russia, Ukraine and other countries could
sell almost all their hot air), big dams included in the 'Clean
development Mechanism', nuclear energy acceptable in joint
implementation projects (Central and Eastern Europe), and
extremely weak rules for 'compliance' (sanctions for not fulfilling
Kyoto targets). Source: "Pronk bids to break climate talks
deadlock", ENDS Daily, November 23 2000.

During COP-6, European negotiators estimated that the
package proposed by the U.S., including the use of carbon sinks,
would actually allow industrialised countries to increase CO2
emissions up to 7%, instead of the Kyoto Protocol's 5.2% cut.

"The (preliminary) outcome of COP-6", The Carbon Market Analyst, 28 November 2000.

See for instance "Carbon trading set to boom despite COP6 failure", Reuters, November 30 2000.

"New Reports Warn of Threat of Global Warming", Houston Chronicle, February 27 2001. Bush continued to present a set of
policies that closely mirror those promoted by industry groupings
like the Global Climate Coalition and the Business Roundtable,
including "market-based mechanisms," increased use of natural
gas (which has slightly lower CO2 emissions), and tax measures
for U.S. businesses that develop cleaner energy technologies.

"The Carbon Market Analyst" calls ratification of the Kyoto Protocol before 2004 a "low-probability scenario" due to the
Republican dominance in the US Senate and estimates the chance
to be 25%. "The (preliminary) outcome of COP-6", The Carbon
Market Analyst, 28 November 2000.

The Bush government argued this would allow them to "take a thorough look at US climate policy". "EU Sets New Targets on
Greenhouse Gas Cuts, 'Worried' About Bush", IPS, January 24
2001.